Apple Profits Are Expected To Shrink For The First Time In 10 Years – Why?

Today, Apple will report its fiscal Q2 2013 earnings today at 2 p.m. PDT. Analysts widely expect the Cupertino company to post its first year-over-year decline in earnings in the last decade. But has Apple really begun its fall from grace, or is the house that Jobs built just falling short of its own impossible standards?

Here’s why Apple has been missing the mark in 2013.

Growing Pains

Apple has fallen victim to its own success, plain and simple. The company’s been on top for so long, we just don’t remember things being any other way. Apple’s market and mind share are the stuff of legend, but they may show signs of waning for the first time in… well, ever in Internet years. While any other company in the universe would be perfectly content being the world’s former most valuable corporate entity, for Apple and its stockholders, that won’t cut it.

Last quarter, in spite of a $13.1 billion profit, an unhappy market punished the company for failing to meet revenue expectations with a 10% share price plummet – AAPL‘s biggest nosedive in years. As Q2 wraps, Apple investors and acolytes alike are still itching to hit the panic button. Arguably it’s not because Apple’s near-future profitability poses any real cause for alarm – perhaps we just don’t remember how this whole thing goes for companies that aren’t Apple?

No New Tricks Up Its Sleeve?

Really, what could the company that brought little white earbuds into ubiquity wow us with next? The iPad Mini, Apple’s latest mobile device, is an exercise in practicality, a version of a revolutionary device with its ambition, processing power and pixel density scaled back (and its price slashed).

At this juncture in consumer tech, consumers are pleased to see their gadgets polished and iterated, but they still love to have their minds blown. Look at Google tinkering away just over the Silicon fence. Between its hefty price tag and its unparalleled geek factor, Google Glass is the quintessential early adopter device, yet Google’s flashy cyborg eyewear has captured the imagination of the mainstream. That used to be Apple’s job.

Unfortunately, reinventing the wheel isn’t easy – even for Apple, a company with a track record of doing exactly that.

The Competition Gains Ground

Competitors like Samsung are gaining increasing traction with a decidedly un-Apple approach and a heterogenous army of Android devices like the hotly anticipated Samsung Galaxy S4, the follow-up to last year’s homerun Galaxy S3. Meanwhile, Apple is wasting more time than ever looking over its shoulder, building the fortifications of the Mac and iOS walled gardens higher than ever.

On today’s call, Jobs successor Tim Cook might have to pull a literal rabbit out of his proverbial hat to exceed expectations. From its products to its profits, Apple likes to think of itself as an exception to every industry rule – and usually it is. Unfortunately for Cook and company, Apple just might be exceptional to a fault.

Stay tuned tomorrow for Apple’s Q2 2013 earnings report, which we’ll be reporting here at ReadWrite as it unfolds.

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